Question

Monthly sales are​ $530,000. Warranty costs are estimated at​ 5% of monthly sales. Warranties are honored with replacement products. No defective products are returned during the month. At the end of the​ month, the company should record a journal entry with a credit​ to: A. Sales for​ $26,500. B. Warranty Expense for​ $26,500. C. Estimated Warranty Payable for​ $26,500. D. Inventory for​ $26,500.

Answer 1

Answer:

C. Estimated warranty payable for $26,500.

Explanation:

The monthly sales are $530,000 and the warranty costs are 5% of monthly sales,

Therefore, Warranty costs will be = $530,000*5% = $26,500.

Now, we know that no defective products were returned during the current month, hence the other options in the questions are discarded and Estimated warranty payable is taken at the month end.

Thank buddy.

Good luck and Cheers.